To be located at the Indian School of Business in Hyderabad, the joint venture will work to provide capital to small and medium businesses in underserved markets, create job opportunities, and spur greater economic participation for a larger segment of the population. The venture has hired Reuben Abraham, currently director of ISB's Base of Pyramid Lab, as senior advisor and plans to hire an investment advisor and two senior investment analysts to recommend and build a pipeline of portfolio investments.
Many small to medium-sized businesses in India lack formal funding options because of a market gap between the microloans offered by microfinance institutions and the larger investments made by commercial banks and private equity funders. Most of the existing small to medium enterprise funds make investments in the $3 million to $5 million range, leaving out a significant portion of this market. The joint venture will target this "missing middle" with equity investments between $500,000 and $3.5 million.
"We have seen what microloans can do at the individual level and are excited about bringing that same opportunity to small and medium businesses," said Jim Bunch, director of investments for the Omidyar Network. "A new generation of entrepreneurs and their families will benefit economically and socially, and as their enterprises grow, these benefits can be shared with employees and their families, as well as the community at large."